fundraising tips for techs
TRANSCRIPT
Welcome to Today’s Webinar
Questions
• Attendees are in listen-only mode• This webinar is being recorded for future on-demand playback• Your participation represents acknowledgement that we are
recording• Tweet questions & comments to: #WelchTech
Windows Mac Tablet
Ground Rules
Presenters
Bryan Haralovich, CPA, CA, CPA (Illinois) Partner, Welch [email protected]:@CAHaralovichhttp://linkd.in/1ioTtbp
Robert FordPartner, Kelly Santini [email protected]://www.linkedin.com/pub/robert-ford/0/2a7/350
What We Will Cover Today
• Where the money comes from:– Types & sources of financing
• How to prepare for financing:– Corporate Structure– Business plan– Cash flow projections– Intellectual Property– Valuation– Other considerations
• How Welch/Kelly Santini can help
Where the Money Comes From
Types & Sources of Financing - Summary
Source of Financing Impact on Cash FlowsCash Flows NoneFounders/Employees P ersonal use of the funds is lost (e.g. lost interest income)Incentives Initial outlay with potential for annual outlays depending on arrangementCustomer/Vendor/Supply Chain P otential for initial outlay or annual outlay depending on arrangementFriends and Family Annual outlay in order to reimburse the funding providedBanks Annual outlay for principal and interest
Angel Investors
Depends on nature - if debentures/preferred shares, then annual interest with potential for principal repayment. If equity, potentially no outlay, but loss of ownership
Venture Capitalists
Depends on nature - if debentures/preferred shares, then annual interest with potential for principal repayment. If equity, potentially no outlay, but loss of ownership
Subordinated Debt/MezzanineHybrid debt facility with equity component, higher cost/yield, unsecured or ranking behind other lenders
P rivate Equity Acquisition financing; later stage equityCapital P ool Company No outlay, but loss of ownership
Initial P ublic Offering/P rivate P lacement
Depends on nature - if debentures/preferred shares, then annual interest with potential for principal repayment. If equity, potentially no outlay, but loss of ownership
How to Fund a Knowledge-based business in Today’s Environment
• Founders & employees• Incentives• Cash flows• Customers/Vendors/Supply Chain• Equipment• Friends and Family (“Love Money”)• Traditional Banks• Angels• Venture Capital• Subordinated Debt/Mezzanine• Private Equity• Capital Pool Corporation/Reverse take-over• Initial Public Offering
How to Prepare for Financing
• Get organized• Get help• Get a lead and leverage
their contacts• Be prepared to pitch a lot• Excellent communication
skills are essential – they are investing in you
• Never stop fundraising…..
• Raising money is a process– Prepare documents- Plan & Presentation– Must pursue multiple simultaneous paths to finance– Start looking before you need it – it’s a long process,
network is critical• Identify right partners
– Industry focus– Investment phase segment– Product
• VCs (and most angels) don’t sign NDAs• Valuation depends on “selling” the opportunity
Raising Money is as much of a Strategy as the Business is
Corporate Structure
• Corporation, partnership, joint venture, etc.
• Canadian or foreign ownership• Stock option plan• Ownership of IP• Doing business in foreign
jurisdictions
How to Prepare for Financing
Business Plan/Financing document• Critical document that will define your venture & help you raise capital• Substance over form• Size, content and level of information should be tailored to the audience• Discuss the 4P’s and why you have an advantage in all of them
(people, product, placement, plan)• Questions a business plan must answer:
– What is the Pain (i.e. market opportunity) & what is your product?– Is the market validated? Is the Pain still big enough?– Who is behind the company?– What is your revenue model: does it work?– What is your proof of concept?– What have you done with money raised to date?
How to Prepare for Financing
Cash Flow Projections• Integrate cash flows with business activities
– Link your day to day business activities to your cash flow– Should segregate fixed & variable cash outflows and those
that are required for sustainment versus growth• Horizon
– Generally from 3 to 5 years• Timing
– Consider when service is received & when is payment due– Consider flexibility in timing/ amounts and plan for
contingencies• Monitor, keep forecasting on a rolling basis –
quarterly, annually
• Ensure that you are creating a clean ownership record for your patents
• Assign the patents to the business• Ensure that all
inventors/employees/contractors execute IP assignments
• Use written employee agreements for all employees.
• Use confidentiality agreements. • Use written consulting agreements.
Intellectual Property
• Employment/Consulting Agreements– Term, Compensation, Non-Compete– Assignment of Intellectual
• Intellectual Property Strategy– MAKE SURE YOU OWN IT! Investors
will insist the entity own the IP rights!• Promises to Initial Investors
– Anti-dilution rights– Percentage ownership promises– Options
Additional Considerations
How We Can Help
• Regional firm with global resources to serve clients– Business like in our approach– 12 offices & 240 staff– Cost structure aligned with entrepreneurs and their businesses
• Extensive experience providing assurance, tax, corporate finance and advisory services– Government Incentives – SRED, Digital Media, etc preparation/support– Corporate Structure– Accounting advice– Personal tax planning– Financial Statement Audits– Business planning advice– Cash flow management– Operational improvements and efficiencies– Access to contacts– & much more
Q & A
Bryan Haralovich, CPA, CA, CPA (Illinois) Partner, Welch [email protected]:@CAHaralovichhttp://linkd.in/1ioTtbp
Robert FordPartner, Kelly Santini [email protected]://www.linkedin.com/pub/robert-ford/0/2a7/350